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Tuesday brought big news in the East's biggest water war, with the Eleventh Circuit Court of Appeals handing what looks like a major victory to Georgia and what clearly is a big loss to Alabama and Florida.

For decades, Georgia, Alabama, and Florida have been battling over the Apalachicola-Chattahoochee-Flint River system (the ACF, for short). The conflict is complicated, but in a nutshell, Atlanta relies on Lake Lanier, a reservoir on the upper Chattahoochee, as a major water supply; Alabama wants enough water to support barge traffic and provide power; and Florida wants adequate environmental flows to sustain the rich ecosystem of the Apalachicola River estuary and Apalichocala Bay. When drought strikes, as it recently did, those uses come into sharp conflict. The states have been trying for years to negotiate a settlement, but without success, and more recently have been playing what J.B. Ruhl aptly described as "three dimensional chess in the federal courts."

Until this week, the chess game hadn't been going well for Georgia. It, and the Army Corps of Engineers, which operates the dam that impounds Lake Lanier, had successfully fended off Florida's claims under the Endangered Species Act (yes, Florida was an ESA plaintiff). But in two recent decisions, first the D.C. Circuit (Southeastern Federal Power Customers, Inc. v. Geren, 514 F.3d 1316 (2008)) and then the U.S. District Court for the Middle District of Florida (In re Tri-State Water Rights Litigation, 639 F.Supp.2d 1308 (2009)) dealt crushing blows to Georgia's position. They held that Lake Lanier was built for flood control, navigation, and hydropower purposes, but not as a municipal water supply, and that the Army Corps of Engineers could not sustain Atlanta's current water supplies, let alone increase them, without additional Congressional authorization. For Georgia, this was a potential disaster, "the most important case for Georgia's future in decades," according to the state's attorney general (as quoted in the Atlanta Journal-Constitution). For Alabama and Florida, it was a trump card.

Tuesday's decision changed the game. The Eleventh Circuit held that that the Rivers and Harbors Act, which contains passages specifically authorizing the impoundment of Lake Lanier, did contemplate the use of the reservoir as a water supply. It also held that Congress anticipated some increase in municipal allocations as Atlanta grew, and that some increase in Atlanta's water supply could happen without a new Congressional approval. The court did not say how much change would be allowable; that, it held, was a question for the Corps to resolve on remand. It also did not remove all of Georgia's potential legal worries, for Florida and Alabama are promising to seek en banc review, and the endangered species in the Apalichola Estuary may still trigger additional limits Atlanta's water use. But Georgia still stands in a much stronger position today than it did a week ago.

Or so it seems. Until recently, Georgia seemed to be going through the growing pains of a major water user who gradually realizes the existence of environmental limits. This doesn't seem to be an easy process, as the struggles of Los Angeles, Las Vegas, San Antonio, and a great many other water-challenged metropolitan areas illustrate. In fact, a transition out of the stage of water-oblivious development sometimes seems to require staring down the twin barrels of a drought and a judicial injunction. But it is an important transition. Once big water users come to grips with the realities of environmental limits, they can do remarkably creative things. From water-efficient building codes to block pricing to water recycling and xeriscaping incentives, we now have a broad menu of options for saving water, and, often, energy and money along the way, without sacrificing the qualities that make a city a desirable place to live.

Prior to the recent drought and litigation, Georgia showed little interest in such options, and was widely perceived as the arrogant bully in the ACF fight. That was unfortunate for all parties involved, not just Alabama and Florida, for Georgia backed itself into a corner by squandering many opportinities for water-smart development. What happens now is anyone's guess. If Georgia builds on its initial efforts at water reform, it and its neighbors will likely be better off in the long run. But water reform tends to be a slow process requiring a sustained commitment, and with a primary incentive gone, Georgia may well go back to its old ways.